U.S. persons holding blocked property as of June 30 must file the 2026 Annual Report of Blocked Property with the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) by September 30. OFAC states that failure to file by that date constitutes a violation of the Reporting, Procedures and Penalties Regulations.
The form asks for something easy to overlook. For each asset listed, it asks for the identification number assigned to the initial report filed when the property was first blocked, if that report was submitted through OFAC’s reporting system. A company that characterised a stopped payment incorrectly earlier in the year will learn that this month, while assembling a filing that assumes the characterisation was right.
A person subject to U.S. jurisdiction that blocks property or rejects a transaction under U.S. sanctions must report the action to OFAC within 10 business days, measured from the date the property becomes blocked or the transaction is rejected. But blocking and rejection are not interchangeable.
Your company may have stopped the payment, or its funds may be sitting at an institution that will not explain why. The first task is to identify what happened. The answer determines the reporting obligation, the available procedure for obtaining release, and the party that can pursue it.
Blocking and rejection are different actions
Property is blocked when applicable sanctions law requires a U.S. person to retain it and deny access to it because a blocked person or government holds an interest. A transaction is rejected when processing it would be prohibited but no blockable interest exists. A rejected transaction “is simply rejected, or not processed and returned to the originator.” OFAC FAQ 36.
OFAC illustrates the distinction with two Iran-related payments. A commercial payment destined for an account at a blocked Iranian bank must be blocked because the bank holds a blockable interest. A payment to an Iranian import-export company that is not itself blocked must instead be rejected because processing it would involve prohibited Iran-related activity. Id.
Rejected funds return to the originator. Blocked property remains immobilised until release is authorised or the legal prohibition ceases to apply.
If your company stopped the payment
Blocked property can generate multiple reports. The initial report is due “within 10 business days from the date that property becomes blocked.” 31 C.F.R. § 501.603(b)(1)(i). Property still blocked and held as of June 30 must appear in an annual report due September 30, and the annual filing obligation continues while the property remains blocked. 31 C.F.R. § 501.603(b)(2)(i). Unblocking or transferring the property triggers a further report within 10 business days, subject to four specific exceptions – among them unblocking explicitly authorised by a specific or general license, unless the license itself requires a separate report. 31 C.F.R. § 501.603(b)(3)(i).
Rejection carries a separate duty. A U.S. person that rejects a transaction “that is not blocked,” but where processing or engaging in the transaction would violate an OFAC-administered prohibition, must report the rejection within 10 business days. 31 C.F.R. § 501.604(a)(1), (c). Returning the payment ends the transaction, but not the reporting duty.
These rules matter beyond financial institutions. Any company subject to U.S. jurisdiction that stops or returns a transaction because of sanctions concerns should document why it acted, determine whether the transaction was blocked or rejected, and confirm that the correct report was filed.
If a U.S. financial institution or other entity blocked your property
Three OFAC procedures are potentially relevant when property has been blocked under an OFAC sanctions authority.
A specific license authorises an otherwise prohibited transaction. A transaction outside a general license “may be effected only under specific license,” and any person having an interest in the transaction or proposed transaction may apply. 31 C.F.R. § 501.801(b)(1), (b)(2)(i).
A “compliance release” addresses property blocked and reported in error when no blockable interest existed. OFAC’s guidance describes two routes for the holder: unblock the property and file an unblocking report, or request authorisation under 31 C.F.R. § 501.806. The process is available only to the organisation that blocked the property. An owner must engage the holder or pursue another available procedure, such as a specific license application. OFAC FAQ 1196.
A delisting petition challenges the sanctions themselves. It is available to a sanctioned person or a person owning a majority interest in property that is blocked or otherwise subject to sanctions. The petition may present evidence that the basis for the sanction was insufficient or that the circumstances resulting in the sanction no longer apply. 31 C.F.R. § 501.807(a).
Neither the licensing regulation nor the delisting regulation sets a deadline for OFAC to decide a license application or delisting petition. The Administrative Procedure Act requires an agency to conclude matters presented to it “within a reasonable time” and directs a reviewing court to compel action that is unlawfully withheld or unreasonably delayed. 5 U.S.C. § 555(b); 5 U.S.C. § 706(1). Such claims are demanding and fact-specific, making a complete submission and documented follow-up important from the outset.
Three things to do now
If your company stopped a payment, calendar the reporting dates. Confirm whether any initial, annual, rejection, or unblocking report is required.
If your company’s property was stopped, establish the basis for the restraint. Ask the holder to identify the legal authority, the blocked interest, the reporting status, and any identifiers assigned through the OFAC Reporting System. The regulations direct those reports to OFAC and impose no disclosure duty running to the owner, so silence alone proves nothing.
Next, match the procedure to the problem. Determine whether the matter calls for a license, holder-initiated correction, delisting petition, private dispute, or response to government process before committing resources to a filing.
Conclusion
When a financial institution or other entity freezes an account or stops a payment, the immediate task is to determine who imposed the restriction and why. Counsel should request the holder’s stated legal basis, ask whether the property was reported to OFAC, and determine whether a warrant, court order, or contractual restriction is involved. Those answers identify the appropriate next step: an OFAC license application, a holder-initiated correction, a delisting petition, a private dispute process, or a response in a forfeiture proceeding.
A frozen account is a symptom, not a diagnosis. Until the legal basis is known, the owner cannot know who has authority to release the property or where relief should be sought. Getting that diagnosis right at the outset can prevent months spent pursuing the wrong remedy from the wrong decision-maker.
Be part of a growing global community committed to advancing in-house legal leadership.
Global sanctions compliance continues to evolve at a pace that leaves little room for static compliance programs or superficial screening models. Recent developments reinforce a...
Last week, the U.S. Department of State implemented the designation of Comando Vermelho (CV) and Primeiro Comando da Capital (PCC) as Foreign Terrorist Organizations (FTOs)....
Learn more about Foreign Terrorist Organistations (FTOs) Designations
